Critical Buyer Mistake #2- Not Having A Home Inspection

 

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Critical buyer mistake #2- Not Having A Home Inspection

There been so many blogs written on this very subject and there is only so much to say. However I’m hoping that I can get you understand as a buyer, why this step is so critically important.

Let’s start with the differences in inspections, there are typically three kinds. They all have different functions and confuse most buyers so here’s the clarification-

Home inspection- This is done by a professional home inspector that you the buyer hire. The report the inspector will give you is yours and only yours. You are under no obligation to share it with the seller. It’s used to make sure that you have something in writing, should there be an issue that needs to be addressed with the seller. This typically costs $400 and it’s as much of a manual of how your home runs as it is looking for problems. This has a lot of value especially when you’re first-time homebuyer and have never changed and air filter on your furnace or have no idea where your gas shutoff valve is.

At time of sale/city inspection- The city typically can care less about you as a buyer. The only thing they’re really interested in is generating more revenue for the city, controlling the sale of real property and making the sellers repair or replace items in their home before the property changes hands to the buyer. It’s not to say that these are useful inspections but should not take the place of a buyer hiring an independent home inspector to evaluate the home prior to purchasing. A city inspection in many cases looks for broader based issues; whereas a home inspector will look at the fine details.

An appraisal- this one is really not an inspection and it is scheduled through the lender that is loaning the buyer the money to purchase the home. The lender wants to make sure that the home is valued at the purchase price. Where this becomes confusing at times is if it’s an FHA loan, the appraiser has to look for certain items that fall under FHA guidelines. At that point it becomes a minor inspection. They’re looking for chipped paint due to their concerns about lead-based paint, cracked or broken windows and other things of that nature. This also should not be confused with a full home inspection.

Finding a really good home inspector is the key to your success in buying a home. They dedicate hours of time in continuing education classes as well as just working out in the field. Most of them have seen it all. Because of this experience they stand a much better chance of finding any potential problems in the home you’re going to purchase that Uncle Bob. So before you make a decision, I urge you to take time and speak to a couple of different inspectors to see where their value is in the service they provide you the buyer.

Tom Sommers  Edina Realty  952-994-7204

Critical Home Buyer mistake #1 of 10- Making an offer on a home without being prequalified.

 

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Critical Home Buyer mistake #1 of 10

Making an offer on a home without being prequalified.

This is so much more common than you would think yet it still amazes me as a real estate agent to this day. The first two things you should be doing as a buyer before you even start looking at homes is to secure a qualified real estate agent and pick a loan officer/lender.

Doing this backwards could cost you. You start out going to a couple of open houses thinking, let’s just take a look and see what is out there for sale. You walk into the third open house and for whatever reason, it just hits you right away and you realize it’s your dream house. Chances are it’s going to be someone else’s dream house as well. Hopefully that someone is not as organized like yourself and has not gone through the loan application process. If they have, not only do they have professional expertise helping them with a real estate agent, they also know exactly how much the payment is gonna be, what they qualify for and that they are ready to purchase. So while you spend the next day or so trying to sort all that out somebody else’s already bought your home.

There are many other scenarios as well including getting into multiple offers. If you write an offer on a house which turns out to be almost identical to another buyers offer, one of the things it can sway the sale it in your favor is a strong preapproval letter and proof that you have gone through the process and are organized. Sellers don’t want to sign a purchase agreement with the buyer who may or may not qualify to purchase their home regardless of the price.

The prequalification is a very simple process where you sit down with the loan officer and they ask you a series of questions. These will include- what is your income per year?, How much debt you have?, Do you have any bankruptcies?, Have you been foreclosed on in the last three years? Or many other similar questions. To very painless process and one that is critical to the success of you purchasing a home.

Please consider what I’m telling you today and take it to heart. It some of the best advice I can offer you as a licensed real estate professional to help you avoid losing out on the home of your dreams.

Tom Sommers  Edina Realty  952-994-7204

10 critical mistakes buyers can make, when purchasing a home

 

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10 critical mistakes buyers can make, when purchasing a home

This blog is designed to save you time and give you content. Q looking to buy a home, why not learn from other homebuyers mistakes? Purchasing a home is a huge decision and with that comes a lot of stress and preparation. Our goal as real estate agents is to minimize the stress and help prepare you to make the decisions that will affect the outcome of this process. Learning from other people’s mistakes can save you a lot of heartache and time. I’m going to do an individual blog for each of the 10 mistakes for more detail. But for now let’s just take a quick look for all of you speed readers.

1) Making an offer on a home without being prequalified

There are steps to the process that have to be done in a certain order. When you jump from step one to step seven, they’re going to be some holes in your approach. You have to take the time to visit with a mortgage professional. They will help you to determine where your comfort level is, what you can afford and most importantly what your monthly payment and obligations will be.

2) Not having a home inspection

Skipping this step is not recommended. It’s one of the cheapest insurance policies you will ever purchase. It runs around $400 to have a professional inspector come in and assess the property are going to purchase. You need to know not only if there any hidden issues but also how your home functions. After the papers of been signed and you on the home, it’s very hard to go back to the seller and complain if you haven’t had an inspection.

3) Limiting your search

Too many buyers get hung up on the idea that craigslist or any other particular website have all of the great deals. This is simply not true because information changes so rapidly now with the Internet. You have to have several different searches set up for you in several different places to make sure that your covered adequately and will see all of the homes that are for sale. The first one to start with is a direct feed from the MLS. This can only be obtained through a real estate agent; it’s not something you can do on your own.

4) Choosing a real estate agent who is not committed to forming a strong business relationship with you

Any time you are in need of hiring someone to do a service for you, it’s always in your best interest to take the time to interview several different people to fill that need. We come from all different types of backgrounds and all different types of experiences. You need to work with someone who you feel is willing to not only investing you but also in the process of helping you find a home. Don’t just pick somebody that’s a part-time realtor. Who you choose to represent you is one of the most important decisions you will make in this process.

5) Thinking there’s only one perfect house out there

I tell my clients on a regular basis for every home that sells another one pops up in its place. I couldn’t continue to do that if it weren’t true. I truly believe you will land where you should and buying a home is a process. You have to be patient and be open to the idea that what you think you want to the home may drastically change from the beginning of the process to the end when you actually purchase a home.

6) Not considering long-term needs

Don’t buy a home that’s smaller than the home you’re currently living in. That’s one example of a long-term need. If you’ve outgrown your home before you even move-in, that’s can be a problem. The other part is even though it’s your home; you have to remember it’s an investment. You want to buy smart so that one day when you do go to sell, you have a home that appeals to the largest buyer pool.

7) Not examining insurance issues

Insurance can be a really tricky thing and most people don’t understand, I can’t say that I understand it all that well either. The one thing I do know is you need to have a home insurance. Especially the right type of insurance. Unfortunately there’s no quick way around this and you need to view all of your options to pick the right plan for you and your family. Too many buyers gloss over this and it ends up creating a problem for them later.

8) Not buying a home protection plan

This is on a case-by-case basis and there are all different types of plans that are available. There are home warranty packages that cover a lot of different things from siding to roofing and everything in between. The caveat is you have to read the fine print. There are other home protection plans that are nothing more than appliance warranties. There’s nothing wrong with these either but it depends on the type of home you’re going to purchase. If you’re buying a home that’s only a couple of years old than maybe the most important thing is a structural warranty plan that may already be available from the builder. Where is if you buy a house that has a furnace is 20+ years old you may want to plan that’s going to cover that plus other appliances.

9) Not knowing the total costs involved

You don’t have to be an MBA to go over all this but it is in your best interest to ask questions and take the time to review your documents. We as an industry are here to help you as is the lending industry. You need to take time out of your day to know what your interest rates going to be. How much your have to put down along with how much your monthly payment is going to be. Sounds silly but you’d be amazed at how many buyers don’t even ask those questions until they’ve already written a purchase agreement on a home.

10) Not following through with due diligence

This last one pretty much covers all of the above. As a real estate agent I can answer any question you have. If I don’t know the answer I will find it for you. I will give you as much information as you ask for and try my very best to always give you my professional opinion. However you still need to read through your documents, ask questions and have a basic understanding of the process. Knowledge is power and the better prepared you are to purchase a home, the better the process will be.

Please look for detailed blogs and videos over the next several weeks detailing all of these 10 mistakes. If you have any questions or concerns please feel free to call or email

Tom Sommers  Edina Realty  952-994-7204

Buying a property with acreage? Don’t forget the well & septic contingency!

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Well and septic contingency-

If you’re thinking about buying a house with acreage like a hobby farm, more than likely you will wind up needing this particular contingency addendum to purchase that home. It deals specifically with the septic system and the well. Because both of these items can be extremely expensive you want to make sure as a buyer that both of them are in proper functioning order before you purchase at home.

Septic tanks are found in several different forms but the most common are amount system and a drainage system. Both of them have holding tanks and are supposed to be pumped on a regular basis by a certified company. Most counties as well as townships require this to be serviced every three years as well as before a property transfers ownership. Not only to ensure that its functioning properly but to make sure that it’s not creating some type of environmental hazard. This is why the EPA will typically keep records as well from the county and state.

The well is something you want have tested for a couple of different things. First to make sure that the water is not contaminated with any pesticides or pollutants. To verify that it is a safe distance away from your septic system and thirdly that is functioning properly for the home. The well pretty much functions on its own but it does have a pump that draws the water up through the pipe into the house. That typically needs to be replaced once every 10 years or so. So when you’re having this inspection you want to verify that the well is pumping properly.

You as the buyer can take both of these tests on at your expense and choose your service providers within a certain amount of time for the contingency. It’s very similar to the home inspection contingency that I had written about earlier on. The other option is you can have the sellers provide for the cost of the inspection and
furnished you with the reports. Either way is fine, which ever you feel most comfortable with.

This is a very important steps to take when purchasing a property with the septic and well. The last thing you want to do is not verify that they are in working order because the cost to replace the septic system alone can run you well over $15,000. Not to mention you want to make sure that your compliant with all state and local laws.

This is the last of the series of buyer contingencies when purchasing a home. Please visit my YouTube page to view the others. Go to YouTube, type in realtorology or Tom Sommers to find my YouTube page. You can also read the rest of the blogs on my real estate website www.realtimehomesearch.com.

If you have any questions please feel free to call me or email me.

Tom Sommers Edina Realty  952-994-7204  tomsommers@edinarealty.com

Financing Contingency. What you need to know about not losing your earnest money!

Financing Contingency.  What you need to know about not losing your earnest money!

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Continuing with the contingency series, today I want to talk about the financing contingency. If you been reading and following the other blogs you already know that a contingency is in addition to the main body of a purchase agreement for residential real estate. For those of you that are new and just joining, I’ll do a quick recap and say the contingency is something that is in place in a contract, to allow the buyer to get out of a contract should there be an issue.

Regarding the financing contingency, the biggest piece to this is being approved for a mortgage. Most of the contingencies as written say something along the lines of, if buyer cannot secure the financing specified in this purchase agreement, and the purchase agreement does not close on the closing date specified, this purchase agreement is canceled. Buyers and sellers shall immediately sign the cancellation of purchase agreement confirming said cancellation and directing all earnest money to be refunded to the buyer. This is your way out of purchasing a home if you can’t qualify for the financing. This is not to say that you shouldn’t go to a loan officer before you write the offer and get fully approved for the loan. This just gives you an option to get out if somehow your financial situation were to change.

  • There’s other piece is to this contingency which include
  • Is the seller contributing to the buyers closing costs?
  • Is this a first mortgage only?
  • Is a privately insured mortgage?
  • Is the rate fixed for a specific amount of time or is it an arm?
  • Is there a cap on the interest rate? Meaning that if the interest rates climb above a certain percentage rate before the buyer locks in, can the buyer cancel the contract?
  • If the seller does not feel comfortable with the above cancellation language, do they want a final underwriting letter by a specific date from the loan officer?
  • When are you the buyer, locking into your interest rate? Is it within five business days of final acceptance of the purchase agreement or at any time prior to closing as required by lender?
  • Are there any lender commitment work orders that you will be asking the seller to pay for?

This is pretty standard language whether you are using a conventional mortgage, FHA or VA loan. However if you’re using an FHA loan there’s an additional escape clause in the contingency that says if the home does not appraise at or above the purchase price the buyer can cancel the contract. You can also agree to renegotiate the purchase price at that point as well but it’s spelled out pretty clearly in the FHA contingency addendum in addition along with lender processing fees there is a portion that asks for any work orders will the seller or buyer be responsible for any reinspection fees?

Talking about this is just further proof that you need to hire a licensed real estate agent to help you through the process regardless of whether your a buyer or a seller. If you have more specific questions, please feel free to send me an email or call.

Tom Sommers  Edina Realty  952-994-7204  tomsommers@edinarealty.com

Want to buy a home but still have a home to sell? How do you protect yourself?

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Want to buy a home but still have a home to sell?  How do you protect yourself?

Continuing with my series on contingencies, this particular contingency is called the sale of a buyers property contingency. Or you can also say I’m purchasing your home contingent upon my home selling. You need to protect yourself when purchasing a home by using the specific form outlining this particular contingency. If you don’t you will be legally bound to the purchase and could end up owning two homes in making to mortgage payments. Most people want to avoid this so it’s very important when you’re drafting a purchase agreement to include this contingency.

  • Essentially what the contingency says is that you are going to or have listed your home located at x with a real estate agent or you will be listing it within x number of days.
  • The seller may remove the contingency at any time and for any reason. This is the one contingency that the seller has control of. They can just wake up one day and decide that the contingency on their house is hurting their ability to sell their home. So your kind of at the mercy of the seller when you present this form.
  • The one way you can remove the contingency so no other party can purchase the home is to give the seller within x number of business days proof of it valid purchase agreement for your home.
  • If the seller requests removal of the contingency in the buyer does not remove the contingency in a timely manner, the purchase agreement will be considered canceled.

So the long and short of all those highlights are you are at the mercy of the seller until you get your property sold. Typically you have a certain amount of time once the contingency is been called to get that home sold. If you’re unable to get your home sold within that timeframe the seller has a right to cancel that purchase agreement and work with another buyer. Biggest downside for a buyer in this is that you have no control over the situation and you typically will get one of two things. You’ll either get a better price or longer term to get your home sold. In most cases you don’t get both.

The upside for the seller is they do have a signed offer on their home and they have the benefit of continuing to try to sell their home to somebody else in the event that you can perform and get your home sold. You gonna want to take a long hard look at this before you decide to move forward with it. Discuss it with your real estate professional so they can give you all of your choices to pick the best option for you.

Tom Sommers Edina Realty 952-994-7204

What are my rights as a buyer regarding association documents?

 

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What are my rights as a buyer regarding association documents?

In continuing with the series on home contingencies, now let’s talk about the addendum to purchase agreement: condominium/townhouse/cooperative common interest community (cic).

If you’ve read any of the other blogs you will know that the contingency is something that must happen in a purchase agreement before the purchase agreement can move forward. If your purchasing a condominium, townhouse or any home that has been Association, you have a right to review any and all of the Association documentation. This includes-

  • Resale disclosure certificate
  • All amendments and updates
  • Articles of incorporation
  • Bylaws of the Association
  • Rules and regulations
  • Projected annual budget
  • Declaration of the Association

All of these items should be handed to you by the seller. At this point according to Minnesota state law you have 10 days to review all of the documentation. If at any time during the 10 days you find something in that paperwork that you do not agree to, you have a right to cancel your purchase agreement and move on to a different home. It’s very important that you take the time to read through these documents. I also encourage you to make sure to get the name and phone number for the contact people at the Association as well as the management company. You never want to rely on a third party to get answers for your questions when it comes to these documents. You want to see it in writing for yourself, if that’s not the case you want to call those people directly to get the answers. This will save you an awful lot of time and hassle and a problem at the closing table.

Tom Sommers Edina Realty 952-994-7204

What is an Inspection Contingency?

 What is an Inspection Contingency?

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To review, a contingency is something that is put in place in a purchase agreement to solve an issue before the sale of the home can move forward. Contingencies come in all types from financing to something broad as rental of farmland.

Today I’m going to focus on inspection contingencies. In Minnesota the form is called addendum to purchase agreement: inspection contingency. You have the main body of the purchase agreement and everything else is an attachment. The contingency form is something that is attached to the purchase agreemen that performs a specific task. With this particular contingency. It focuses on several different aspects of a home inspection.

  • The buyer has a right to a full home inspection to their satisfaction. This means they can higher any inspection company or inspector that they choose.
  • The form asks if there will be intrusive testing, meaning will the inspector be drilling holes in the wall? If so it is the responsibility of the buyer and the inspector at the buyers expense to have any type of intrusive testing be repaired by the end of the inspection.
  • The inspection must be performed within a certain amount of business days from the final acceptance date of the purchase agreement. Most typically I see five business days but like everything else in a purchase agreement the amount of days is negotiable.
  • Once you have completed the inspection and have reviewed the documentation you will have another specific amount of business days to furnish the seller in writing with a list of issues. You can resolve this in many different ways by simply asking for a price adjustment, asking the seller to make the repairs or canceling the purchase agreement.
  • Once you have turned this list in writing over to the seller the last piece of this contingency goes into effect which gives you X number of business days to negotiate an agreement with the seller. I’m typically seeing two business days for this as well as the aforementioned list. If you’re not able to put an agreement together by the end of that last business day, the contract is automatically canceled.
  • There’s also provision in this contingency to allow all parties to agree to a specific amount of time after the cancellation of the purchase agreement, to sign a cancellation and return all earnest money to the buyer. Again typically I’m seeing two business days but it’s negotiable.
  • Lastly there is an option to allow the seller to continue to market the property during this contingency period.

The language is very straightforward and as a buyers agent or a sellers agent, it’s my job to make sure that my clients are working within the confines of the agreed contingency. The other thing I’d like to point out is it’s important to note that many cities have a time of sale inspection. That is not the same as a home inspection paid for by the buyer. You also do not want to confuse this home inspection with an appraisal. All three of them have very different functions.

I would never recommend purchasing a home with out hiring a home inspection. It’s not just about finding problems with the home, it’s also to teach you about how your home functions. From the sellers side you want to encourage the buyer to have a home inspection. This is one more thing that will give you more protection by discovering any issues ahead of time. For more information on contingencies please visit my blog and YouTube channel for other updates.

What are contingencies in a residential real estate transaction?

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A contingency is anything that is in a contract that has to be resolved before the transaction can move forward.  They are specifically placed into a contract to resolve specific issues.  There can be an endless number of them depending on the contract and will vary from transaction to transaction.  There are 6 that are the most common.

  • Inspection contingency-  This is added to the purchase agreement to allow the buyer a specific amount of time to hire an independent inspector to look over the home. Typically the buyer has 3 to 5 business days from time of the signed agreement by all parties to have this completed
  • Condo or town home association contingency-  If you are buying a town home or condo in the state of Minnesota by law the seller must provide you with all of the association documents to review.  You typically have 10 day once you receive them to review all of the information.
  • Contingency of the buyers home- This is used when the buyer that wants to purchase a home still has a home they must sell before they can close on the one they are trying to buy.  This gives the buyer an out of they can’t get their home sold, they don’t have to move forward with the purchase.
  • Financing contingency-  This allows the buyer to move through the loan process to buy the home.  If for some reason they can’t qualify for a mortgage, they can get out of the purchase.  Plus many will say the sale price of the home must have the same appraisal value or the buyers won’t qualify.
  • Septic and well inspection contingency-  If you are buying a property with a well and or septic system, this contingency says that both must pass inspection and be in proper working order.  If not the buyer can back out of the transaction.
  • Miscellaneous contingency- This cover almost anything else.  Anything from sub division of land, can the buyer put up a building or add an addition.

There are all types of contingencies in a real estate transaction so its really important no matter if you are the buyer or the seller to have a full time licensed real estate professional representing you.

If you have any questions or concerns please feel free to email me at- tomsommers@edinarealty.com

Incredible Rambler just reduced to $199,900!

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Welcome to 8601 Queen Ave. S. in Bloomington Minnesota 55431. This wonderful Rambler has just been reduced to a list price of $199,900. The location is fantastic right off of Penn Avenue and 86 Street. Your less than five minutes to Interstate 494, which makes a very quick commute to downtown or either side of the Metro area.

This home is been lovingly cared for by its current owners and they have continued to update and upgrade the home over the last 10+ years. It has maintenance-free siding, a new sewer line, a newer furnace and air conditioner so you can feel confident that all of the maintenance of the home has been cared for. This is a home that you can buy with confidence!

some of the many features include-

Eat-in kitchen

informal dining

three bedrooms on the main level

beautiful hardwood floors

newer windows

huge corner lot

fenced backyard

oversized two-car garage with attached workshop

lower level family room

lots of storage

all appliances stay with the home

If you have any questions or would like to schedule the showing please call Tom Sommers 952-994- 7204